Liabilities are divided into which two categories on the balance sheet?

Liabilities on the balance sheet are indeed categorized into short-term and long-term. Short-term liabilities, also known as current liabilities, are obligations that a company expects to settle within one year. These can include accounts payable, short-term loans, and other debts that are due in the near future.

Long-term liabilities, on the other hand, are those obligations that are not expected to be settled within one year. This includes items like bonds payable, long-term lease obligations, and long-term loans.

This classification is crucial for stakeholders as it provides insight into the company's financial health, particularly its liquidity and ability to meet short-term obligations. By distinguishing between short-term and long-term liabilities, investors, creditors, and management can better assess the risk and determine cash flow requirements for both the immediate and distant future. Understanding this division helps in analyzing the company's capital structure and overall financial stability.